President Donald Trump sent shockwaves through trade policy circles on Monday when he publicly dismissed the United States-Mexico-Canada Agreement as effectively meaningless, a remarkable repudiation of a deal he once championed as a cornerstone achievement of his first administration.

"There's no real advantage to it; it's irrelevant," Trump stated during a visit to Detroit, Michigan, where he toured automotive facilities grappling with the complex web of tariffs his administration has imposed on imports from America's two largest trading partners.

A Trade Pact Under Siege

The comments arrive at a critical juncture for North American commerce. The USMCA, which replaced NAFTA in 2020 after extended negotiations, is now subject to its mandatory six-year review—a provision Trump himself insisted upon during the original talks. That review process, which formally begins in 2026, requires the three nations to assess whether to extend, renegotiate, or terminate the agreement.

Currently, Canada faces 35 percent tariffs on most goods shipped to the United States, though the majority remain exempt under USMCA's existing provisions. Both neighbors also contend with sweeping 50 percent levies on imported metals and 25 percent duties on non-US automobiles, measures that have already begun disrupting integrated supply chains that took decades to construct.

"The USMCA was designed to provide predictability for businesses making long-term investment decisions. These comments introduce exactly the kind of uncertainty the agreement was meant to eliminate."

— Mary Lovely, Senior Fellow at the Peterson Institute for International Economics

The Tariff Math Facing American Households

The Tax Foundation estimates that Trump-era tariffs represent the largest US tax increase as a percentage of GDP since 1993, translating to an average burden of approximately $1,500 per American household in 2026. While businesses have absorbed roughly 80 percent of tariff costs to date, analysts at JPMorgan warn that ratio could flip dramatically in the months ahead.

"Businesses footed the bill through 2025 because they were uncertain about policy durability," JPMorgan economists wrote in a recent client note. "As tariffs become embedded in the trade architecture, that 80 percent business absorption could shrink to 20 percent, with consumers picking up the rest."

The implications for everyday Americans span from grocery prices to automobile affordability. Integrated North American auto manufacturing means a single vehicle may cross borders multiple times during production, with each crossing potentially triggering tariff assessments under current policy.

Legal Uncertainty Compounds Market Anxiety

Adding to the turbulence, the Supreme Court is expected to rule shortly on legal challenges to certain tariffs imposed under the International Emergency Economic Powers Act. On May 28, 2025, the Court of International Trade declared executive orders implementing "fentanyl" tariffs on Canada, China, and Mexico invalid, though enforcement has continued during appeals.

Trump himself has acknowledged the legal complexity, posting on social media that a Supreme Court ruling against his tariffs "would be a complete mess" and warning of difficulties in processing potential refunds. "It would take many years to figure out what number we are talking about and even, who, when, and where, to pay," he wrote.

The Zombie Agreement Scenario

According to risk consultancy Eurasia Group, the most likely near-term outcome is a "zombie" USMCA—neither formally renegotiated, extended, nor terminated. Under this scenario, tariff exemptions for compliant goods would keep free trade on life support while political uncertainty prevents meaningful reform.

"Canada and Mexico will likely end up with lower average effective US tariff rates than much of the world, but far higher than the near-zero rates the USMCA promised," Eurasia Group analysts wrote in their annual risk assessment. "Businesses will face the worst of both worlds: enough disruption to impair operations, but insufficient clarity to justify relocating supply chains."

What Investors Should Watch

  • Auto sector exposure: Companies with heavy cross-border manufacturing, including Ford, General Motors, and Stellantis, face the most direct impact from tariff escalation.
  • Agricultural commodities: Canadian and Mexican retaliatory measures have historically targeted American agricultural exports, potentially pressuring farm-belt economies.
  • Industrial stocks: Manufacturers dependent on integrated North American supply chains may face margin compression as input costs rise.
  • Currency movements: The Mexican peso and Canadian dollar both remain sensitive to trade policy developments.

Historical Precedent Offers Limited Guidance

The current trade policy environment has few modern precedents. While previous administrations have used tariffs as negotiating leverage, the combination of broad-based duties, legal challenges, and explicit dismissal of a sitting trade agreement represents uncharted territory for markets accustomed to gradual policy evolution.

For investors and business leaders, the message from Washington appears unmistakable: the rules-based trading system that governed North American commerce for three decades can no longer be taken for granted. Whether that represents a negotiating tactic or a genuine policy shift remains the trillion-dollar question hanging over markets.

The USMCA review process will unfold over the coming months, with formal decisions potentially extending into 2027. Until then, businesses and investors face the unenviable task of planning amid fundamental uncertainty about the future of North American trade.